Copper fell on Friday, posting its sixth straight weekly loss as it moved back towards a recent 5-1/2-year low, weighed down by a stronger dollar and concerns about the outlook for demand from top consumer China. Three-month copper on the London Metal Exchange (LME) ended 2.74 percent lower at $5,510 a tonne. Prices hit a 5-1/2-year-low of $5,353.25 last week and are down more than 12 percent so far this year.
The metal used in power and construction posted a 3.5 percent weekly fall. The last time copper had a six-week losing streak was in mid-2012. "We think the fall is too much. But there probably isn't any hurry (from consumers in China) to buy copper at the moment as no-one is going to be accumulating metal ahead of Chinese New Year. So that's a short-term negative for copper," said Natixis head of commodities research Nic Brown. In China, data showed manufacturing growth stalled for the second straight month in January and companies had to cut prices at a faster clip to win new business, adding to worries about growing deflationary pressures in the economy.
The US manufacturing sector continued to expand in January but at a slightly slower pace than the month before, matching the lowest reading in a year, an industry report showed on Friday. The dollar hit its highest since September 2003 against the euro. A strong dollar makes commodities priced in the currency more expensive for holders of other currencies.
The euro has come under strong pressure since the European Central Bank's announcement on Thursday that it would pump around 1 trillion euros into the sagging euro zone economy. "There's a strong possibility that ECB QE (quantitative easing) could put a floor under some of these commodity prices ... when the dust settles," said analyst Joel Crane of Morgan Stanley in Melbourne. But the copper market also has to contend with rising supplies.
Copper stocks in LME warehouses have surged by more than a quarter since the start of the year to more than 235,150 tonnes. In other metals, nickel closed down 3.37 percent at $14,350 a tonne, lead ended at $1,846, down 2.33 percent, aluminium closed at $1,828, down 2.04 percent, zinc at $2,095, down 2.19 percent, and tin down 0.15 percent at $19,475. Moody's Investors Service changed its outlook for the global base metals industry to negative from stable due to weaker economic growth, a drop in investor sentiment and falling copper prices.